Compaq to acquire Digital

Former minnow swallows former whale

The long-running rumors
[1],
[2] have fructified. The $9.6B cash/
stock deal
[3] is the largest ever in the computer industry, and
will result in the third-largest computer company (after IBM and
HP), with annual revenues of $37B. Digital shareholders will get $30
plus 0.945 Compaq shares for each DEC share owned. Digital will
operate as a wholly owned subsidiary of Compaq. The deal must pass
regulatory scrutiny and is expected to be finalized in the second
quarter of this year. This PC Week analysis of the deal
[4] quotes
Enrico Pesatori, CEO of Tandem (recently acquired by Compaq),
without noting that Pesatori ran Digital's PC business unit from 1993
to 1997. Digital stock rose more than 20% today on the news.

On Thursday Microsoft ducked a contempt-of-court ruling by agreeing
to remove Internet Explorer from the Windows 95 product offered to
resellers, after having argued strenuously that it could not do so
[5],
[6]. The next battle will be in appellate court in April, when
the company's appeal of Judge Jackson's December 11 ruling will be
heard. The court-appointed Special Master is to report at the end of
May. Of course the whole question of whether IE can or should be
unbundled from Windows 95 will be moot by midyear, when Windows 98
launches. Judge Jackson's order, if eventually upheld and enforced,
certainly is worded as if it means to include Windows 98. The
Justice Department is widely rumored to be pursuing a new antitrust
case against Microsoft focused around Windows 98 and the company's
deals with ISPs. Here is Yahoo's summary coverage of the Microsoft
story
[7].

Note added 1998-01-28:
Two readers pointed out that calling Microsoft's action "remov[ing] Internet
Explorer from the Windows 95 product offered to resellers" is an exaggeration
at best. The two new options Microsoft agreed to present to OEMs are:

A. Licensing and preinstalling OSR 2.0 as modified to reflect
the set of changes that would be made by running the Add/
Remove Programs utility with respect to Internet Explorer 3.x

B. Licensing and preinstalling OSR 2.0 as modified by removing
the Internet Explorer icon from the desktop and from the
Programs list in the Start menu and by marking the file called
IEXPLORE.EXE "hidden"

On the same day, Thursday 1/22, Netscape announced a new policy of
giving away its browsers
[8]. You can now download
[9] Communicator
4.04 free of charge and free of guilt. By this unilateral levelling
of the browser playing field Netscape renounces 13% of its revenue,
amounting to $17M in the last quarter. The company is now calling
itself "both an enterprise software company and an online service
company," having morphed its much-visited top page into the free
membership-based Netcenter. This move will begin to put pressure on
the revenues Netscape collects from partner search engines and
content sites.

The bigger news by far is that Netscape will play out a hugely
audacious gamble by freely publishing the source to its next-generation
browser
[8]. History will tell whether this strategy is a foundation
for 21st-century Net software development or a train wreck.
Successful examples exist of "bazaar not cathedral" freeware software
development
[10], but none is commercial. The majority reaction in the
developer community to Netscape's move is positive verging on the
ecstatic
[11],
[12],
[13] but some notes of caution are appearing
[14]. Coordinating the work of thousands of far-flung developers
will not be a doddle in the park. Analysis from the business
community is considerably less upbeat
[15],
[16].

Netscape will release source code for Communicator 5 with its first
beta in late March. The exact license terms were not announced but
the company made reference to the GPL
[17], or copyleft, introduced
by the Free Software Foundation in the 1980s. The GPL requires
anyone redistributing modified versions of copyleft code, whether for
free or for fee, to perpetuate its copyleft status. The catalyst for
Netscape's decision was apparently this suggestion
[18] posted by
Rob Malda, a college student in Michigan, the proprietor of
slashdot.org ("news for nerds that matters")
[19]. On the day of
Netscape's announcement Chris Thompson registered the domain name
openscape.org
[20] and put out the shingle as a collecting-point for
folks interested in working on Netscape code. (Netscape said they
will set up their own site to distribute source code and collect
enhancements, so it's not clear what part Openscape might play. "If
in 30 days it seems... frivolous and unnecessary, I'll glady delete
the domain name and walk away," Thompson said.)

The Feds want to get out of running the Net, but how -- and how slowly -- will matter a lot

The long-awaited report of the Ira Magaziner task force on domain
naming is expected out sometime this week. Its content has been the
subject of rumors and leaks since the first of the year. I have no
hard news to share on this subject -- the report will be the subject
of a Tasty Bit of the Day once it's published -- so will content
myself with pointing you to this recent Wired coverage
[21] and this
TechWeb story
[22] on the companies that have signed up with CORE,
the Council of Registrars now carrying the standard for 2-year-old
IAHC plan to expand top-level domains
[23]. If you want to hear Mr.
Magaziner you can tune in to this 1/19 RealAudio news conference
[24], but be warned that he spends 16 minutes saying general things
about the proper role of government in the Net and not much about
domain naming.

Longtime readers know that TBTF has been reporting on security
weaknesses in Microsoft's products, particularly Internet Explorer, for
more than a year
[25]. Now a security expert from New Zealand, Peter
Gutmann, has posted a paper
[26] claiming that the flaws are so
serious that Windows 95 users should entirely refrain from using the
Web. Among the problems Gutmann points out is a critical weakness in
the way Microsoft software protects (or does not protect) users'
master encryption key; this weakness undermines all other
encryption components in Web servers and browsers. Gutmann outlines how a
cracker could quietly retrieve the private key from a victim's
machine and break the encryption that "protects" it in a matter of
seconds. The attacker has, Gutmann says, then "effectively stolen
[the user's] digital identity, and can use it to digitally sign
contracts and agreements, to recover every encryption session key
it has ever protected in the past and will ever protect in the
future, to access private and confidential email, and so on."
TechWeb coverage is here
[27].

The king of spam pokes an eye above the trenches and the antispammers shoot it blind

TBTF for 1997-11-24
[28] reported on spam king Sanford Wallace's plans
to form a backbone network, called Global Technology Marketing Inc.,
to revive the operation of his much-despised Cyber Promotions after
he was booted off AGIS Internet. The threatened network has not
appeared, but Wallace and partner-in-spam Walt Rines did quietly set
up a GTMI Web site to serve as an advertising billboard. This act
of merely raising a periscope above the trenches promptly attracted
withering fire from anti-spam forces. They deluged GTMI's hosting
ISP, Galaxy Net, with complaints and veiled threats; they applied
pressure through Galaxy's upstream provider, GeoNet. Within hours,
Galaxy reluctanty pulled the plug on GTMI, despite the fact that
the spammer site had broken no rules. The scorched-earth victory
won the anti-spammers no friends or admirers at Galaxy Net. Read
more about it here
[29].

Three thoughtful essays on the state of software, and Microsoft's position, in these markets

Three readers sent thoughtful responses to EM Ganin's article on
Microsoft's Hebrew versions of its software, published in TBTF for
1998-01-19
[30]. One, from Alexander Gagin <gagin at cityline dot ru>,
editor-in-chief of the Russian magazine Internet, ran as Tuesday's Tasty
Bit of the Day. These are collected
[31] on the TBTF archive along
with two other missives, from Gil Rimon <gil at rimon dot org> in Israel
and from Dr. Anton Nossik <anton at cityline dot ru>, editor of the
Russian-language Evening Internet Daily. A thread running through the
commentaries is the role of rampant software piracy in establishing
Microsoft as the dominant player in these countries.

The new advisor is Steven Honigman, brought in from his position as
general councel to the Navy
[32]. It's not clear how far his
portfolio extends beyond policy and implementation for government
procurement of cryptography products. Honigman's predecessor David
Aaron lasted less than a year before moving to a position in the
Commerce Department. Aaron demonstrably failed to obtain
cooperation, or even acquiescence, from US allies
[33] on a policy of
export limitations and key recovery. (After a year-long legal battle
the Electronic Privacy Information Center has obtained from the
State Department 500 pages of Ambassador Aaron's travel logs; they
have not yet been posted on the Web.)

Keith Lynch <kfl at clark dot net> has been on the Net for longer than
anyone I know. He's been squirreling away email messages and
Usenet posts since 1975 and from them has constructed a succinct
timeline
[34] of first mentions of products, jargon, terms,
concepts, and items of Net culture. Some excerpts: